LinkedIn Expands in China With Local Website

By Sarah Frier -
Feb 25, 2014

LinkedIn Corp. (LNKD) is introducing a
Chinese-language website that will restrict some content to
adhere to state censorship rules, expanding in a country where
U.S. technology companies have clashed with the government.

The Mountain View, California-based professional social-networking company is offering a new version to provide a more
localized service after more than a decade of having an English-language site there, Derek Shen, LinkedIn’s China president,
said in a blog post yesterday. LinkedIn is also creating a joint
venture with Sequoia China and China Broadband Capital to
connect more than 140 million Chinese professionals, he wrote.
LinkedIn said it has more than four million members in China,
which is one of the company’s fastest-growing user bases.

The new website puts LinkedIn deeper into a country where
social-media peers such as Twitter Inc. and Facebook Inc. are
blocked after they balked at government censorship rules.
Facebook hasn’t built up operations in China beyond hiring
contractors to help advertisers reach people outside of the
country, spokeswoman Debbie Frost has said. Google ran afoul of
Chinese authorities in 2010 for refusing to abide by local
censorship requirements, leading to the company shutting its
unfiltered search tools there and redirecting users to pages in
Hong Kong.

The shares of LinkedIn rose 5.1 percent to $209.84 at the
close in New York, leaving them up 31 percent in the past 12
months, compared with a 22 percent climb in the Standard &
Poor’s 500 index.

Being Transparent

LinkedIn Chief Executive Officer Jeff Weiner vowed to be
transparent about how the company conducts business in China and
said he will “undertake extensive measures” to protect member
data.

“LinkedIn strongly supports freedom of expression and
fundamentally disagrees with government censorship,” Weiner
said in a LinkedIn post. “At the same time, we also believe
that LinkedIn’s absence in China would deny Chinese
professionals a means to connect with others on our global
platform, thereby limiting the ability of individual Chinese
citizens to pursue and realize the economic opportunities,
dreams and rights most important to them.”

China is a key piece of LinkedIn’s growth strategy, Weiner
said on a conference call with investors this month, after
announcing a first-quarter sales forecast that missed analysts’
estimates. China has a population of 1.35 billion, more than
quadruple that of the U.S., where Internet penetration is
already deep.

LinkedIn makes money through advertising, software for
recruiters and premium accounts. The company received $36.2
million in revenue, or 8.1 percent of the total, from the Asia
Pacific region in the fourth quarter, up from $22.8 million in
the year-earlier period.

Expansion Opportunity

The absence of U.S. social media companies in China has
spurred a boom in copycat competition. Sina Corp.’s Weibo, a
Chinese service that works like Twitter, has 60.2 million daily
users in the country and is pursuing an initial public offering.

There is so far no major professional networking site in
China, leaving LinkedIn room for expansion, according to Erin Ennis, vice president of the U.S.-China Business Council.

“They’ve got the beginnings of a client base for what
their product does,” Ennis said. When it comes to censorship,
“the realities of doing business in China are that you have to
comply with the rules of doing business there.”

Yet the move could set the wrong precedent, according to
Richard Fontaine, president of the Center for a New American
Security, a Washington-based research organization focused on
global security issues such as the emergence of China’s economic
power.

“They should enter the market with the aim of a net
expansion of free online expression rather than a diminishment
of it,” Fontaine wrote in an e-mail.

LinkedIn owns 93 percent of the China joint venture with
Sequoia Capital and CBC. The other partners put in $5 million in
cash for a 7 percent stake, according to a filing earlier this
month with the U.S. Securities and Exchange Commission. The
partners have the option to contribute $20 million more for
preferred shares, the filing said.